February 4, 2011 > HealthCare...Who Cares?
By J. Dennis Wolfe
On a late night in Congress in 1986 a last minute amendment was added to the bill that became The Consolidated Omnibus Budget Reconciliation Act. The amendment went into effect on July 1, 1987. Of course, we all know this amendment simply as COBRA. The financial stability of the healthcare cost-delivery system has never been the same since. So, let's learn how it works and what its step-child, Cal-COBRA does to help smaller groups.
COBRA is federal legislation affecting groups with more than 20 employees. It has limits as to how a person can continue their former employer's group coverage. You can retain an employer's plan when leaving employment and change to any other plan offered through a former employer during open enrollment. Federal COBRA coverage can be continued for 18 months, or longer under special circumstances. At the completion of 18 months, California allows coverage to continue for another 18 months through Cal-COBRA.
For the first 18 months, payments are made directly to the former employer or their COBRA administrator. Under Cal-COBRA, all communication and payment is made directly with the insurance company. Cal-COBRA is immediate for employees of companies with less than 20 employees and takes effect after 18 months have passed under COBRA for employers of 20 or more. In rare situations, Cal-COBRA is not available after COBRA benefits expire. This occurs with larger employers who are self-insured.
Knowing how to continue coverage after COBRA/Cal-COBRA involuntarily ends is absolutely critical.
Many small employers are unfortunately dropping or reducing group health plan benefits; this impacts not just current employees but also former employees on COBRA or Cal-COBRA.
ACTION ITEM: You cannot continue a group plan that no longer exists but if this happens, a unique qualifying event can occur.
Under Federal HIPAA (Health Insurance Portability Accountability Act) an individual policy can be purchased on a guaranteed issue basis with no pre-existing condition limitations. Those in this situation should contact an insurance broker who understands the process.
When COBRA/Cal-COBRA terminates due to running its course of 18/36 months, OR when coverage is involuntarily ended as previously outlined here, the insured will receive a Certificate of Creditable Coverage. This document is a lifeline to guaranteed coverage.
Although not all insurance carriers offer an individual HIPAA policy, Anthem and others do. Be certain of this option before going any further in this process.
First, apply for a regular individual policy, which can be declined. However, the application will ask if the applicant is HIPAA-eligible. To prove eligibility, the Certificate of Creditable Coverage is required.
There is one small trap to avoid. DO NOT voluntarily terminate COBRA/Cal-COBRA coverage prior to acceptance in a HIPAA policy. This will result in the loss of HIPAA eligibility.
Understanding COBRA and Cal-COBRA is difficult but not impossible. What is difficult is paying the premiums. Sadly, many employers are terminating older employees who cost more in premiums and pose greater risk of heath care claims. Do not run from this. Confront reality. Talk to an employer before they act on this.
All small group employer plan losses are pooled by insurers and can result in escalating premiums so take the bull by the horns and avoid expensive COBRA/Cal-COBRA premiums by renegotiating your compensation package, paying a greater share of the health insurance premiums.
I learned long ago that 50 percent of something is better than 100 percent of nothing.